I recently heard from a friend that there are so many foreclosures in Detroit that you could buy a home for a few thousand dollars. Call me crazy, but being a real estate investor, this was too good to be true. I figured the homes would have to be in bad areas or not worth purchasing. But I was wrong. Not only are the houses in livable condition, but you can rent them for a couple hundred dollars each month and still turn a profit. I took some time before making my first purchase to get a better idea of the areas in, and around, Detroit.
The most difficult part of buying a home in Detroit was figuring out the best place to buy. I never thought you could have too many homes on the market available for purchase at any given time. When I started looking at the homes in Detroit, I realized why the home prices are so low. There is entirely too much inventory. I didn’t let that stop me from finding what I was looking for, which was a three-bedroom home with at least one bathroom that I could rent out to someone that was losing their home. If you make things cheap enough, you can easily find someone to rent the property.
I realized that I needed to find out where there were schools that ranked highly, nationally, in the Detroit area. After finding the schools, I quickly began my search for real estate. After a few days I had looked at more than 25 homes that met my criteria. After narrowing down my options I was ready to write offers. I had to realize that the process to purchase these homes took a little bit longer than a normal transaction, but the extra time was worth the wait because you can get real estate for the price of a used car.
After my escrow closed, I quickly found a property management company to take care of the first home I acquired. I told them about my strategy and started tracking down potential renters. My techniques worked a lot better than I anticipated because as more and more people lose their incomes, cheap housing becomes a commodity. My property was rented within two weeks and I was able to put in more offers on other properties in similar areas.
The reason I chose to purchase real estate in a depressed market is because of the quick return on my initial investment. I will have recuperated the purchase price of these properties in under two years of renting. And because I do watch many different trends in the real estate market, I know that in the not so distant future these properties will be worth considerably more than they are today. I also gain a sense of pride knowing that I can help those that are in need.